There is nothing at all remarkable in the fact that a number of top MLB free agents remain unsigned as of January 15. What IS remarkable – at least to me – is that there is so little chatter and rumor about where those guys will end up.
I’m referring to the remaining free agents who received qualifying offers: on the offensive side, Stephen Drew, Nelson Cruz and Kendrys Morales. Among the pitchers there are also a number who received the qualifying offer as yet unsigned, but their situation is a little different as I’ll discuss below.
The qualifying offer is in the neighborhood of $14 million for a single season, and despite the salary inflation that has been seen this offseason (as in Jhonny Peralta‘s deal, for example) it looks like each of those three hitters would have been better off taking the deal. IF they had not received the QO, it’s also easy to imagine any of them getting something like a 4-year, $55 million contract – despite the fact that none is frankly that great. There is a premium for power on the free agent market, which Cruz and Morales both possess and Drew was (and of course, remains) the only solid shortstop in this year’s class. Nonetheless, after declining those offers they hear nothing but crickets – particularly given that their previous teams seem in all cases to have moved on already.
As part of the Tanaka hubbub, Dave Cameron of Fangraphs wrote an interesting piece on how the value to a team of a top prospect could be inferred from what teams were willing to pay guys like Tanaka, Jose Dariel Abreu, Yoenis Cespedes or Yu Darvish. In all cases, that’s at least $50 million, sometimes a lot more, for a guy who would be a top-20 prospect but hasn’t played a game in the bigs. Cespedes and Darvish did spectacularly well, but we have also seen a lot of similar cases that haven’t gone so smoothly. It’s true that these guys were all presumed to be major-league ready talents (like a prospect who spent last season at AAA) and would therefore be far less risky than a draft pick, but I’d still argue that international signings like these can tell us quite a bit about what a first-round pick might be worth.
I’d point out, first, the case of Jorge Soler… Soler signed with the Cubs for $30 million the summer before last despite not being considered to be anything like a major league ready prospect. Prior to last season, he was ranked the #42 prospect overall by MLB.com – which is probably where just about every team at least imagines that it’s 1st rounder will ultimately fall (though many, of course, won’t). Imediately after signing in 2012 he played some rookie ball and then some in low A, hitting well. He didn’t play all that much in 2013 in high A, but did pretty well when he was in the lineup (.810 OPS). He’ll turn 22 in a couple of weeks, and (I’m guessing) start the 2014 season in AA. He’s the very definition of a prospect and exactly the kind of prospect you plan on getting with your, say, #19 overall pick in the draft. He signed a $30 million contract for 9 years – presumably the idea was that he’d take 3 to make the bigs (though it’s probably looking more like 4 now) and the contract would cover what would otherwise have been his 3 years of total team control as well as the three arbitration years (and if he took longer to get to the big leagues then the Cubs would have another year or more of arb control).
It’s probably not so simple as to say that if Soler is worth $30 million then the draft pick that a team would be sacrificing to sign Nelson Cruz is worth $30 million – though I am tempted to do just that. In truth, the value of that pick should be a bit less – since for Soler it incorporates his signing bonus (maybe $3 million if he were drafted) as well as pre-setting his arbitration salaries, which could be valuable for the Cubs if he ultimately turns out to be a star. I’m going to peg the value of those caveats at an arbitrary $10 million and say that the value to the team that signs Kendrys Morales of the pick that they give up could be as much as $20 million.
That might sound absurd, given that the $4.95 million that the Rangers paid Nomar Mazara in 2011 out of the Dominican in 2011 brought incredulity. But… older prospects (like Soler, who signed at 20, and draft picks out of college) are lower risk signings than a 16-year-old like Mazara. AND, of course, salary inflation increases the value of cost-controlled talent every single year while the new CBA makes prospects (not just money to sign them) an even more precious commodity. If only the league allowed teams to sell draft slots to others, then we’d find out what (for example) the number #16 slot was actually worth. I’m guessing $20 million at the high end, maybe $10 million at the low end – though in part the extremely high value today may be due to the fact that you cannot just buy a pick.
That extra cost associated with signing decent-but-not-great veterans like Morales, Cruz and Drew is just too high. It’s a shame that they didn’t see that. Last year’s “guy unlikely to sign due to QO” was Rafael Soriano – who felt that one year for $13 million or so was so little and wanted (if I recall) a minimum of 2 years and $28 million. Boras ultimately got him that money by taking half of it in long-term deferred payments, which teams seem to almost ignore. I don’t think it’s a stretch to imagine that the Nats felt that they were getting an effective $10 million discount over what Soriano felt that his market value should have been. Soriano should have taken the offer. Drew should have. Cruz should have. Morales should have. Maybe we’ll wind up with these guys signing contracts in the neighborhood of 2 years and $15 million. We’re also faced with the possibility that one or more might just not sign. Maybe he’d play in Japan for a year and come back to look for a new contract without that qualifying offer yoke around his neck. The MLBPA is just going to love that.
The market for pitchers has been distorted by the delayed market for the top pitcher available, Masahiro Tanaka, but it’s possible that we’ll see a similar situation for Matt Garza, Ubaldo Jimenez and Ervin Santana. The ultimate impact, of course, depends on what kind of contract the guy would otherwise have been able to sign: I’d say you hack $10-$20 million off of that IF the team that made the offer is not interested in him. For Santana, probably the pick of the litter, he might drop from a 5-year, $90 million contract to a 5-year $75 million contract. It could be a little harder on Jimenez than the other two – but probably not nearly so hard on him as on Kendrys Morales as I can’t see it forcing Jimenez below a 4-year, $40 million deal. If the guy would otherwise have been settling for a shorter term deal, it’s bound to be rougher. I could actually see the Tigers going after Santana in the next month or so (more on that soon) and I think if he did not come with that draft pick cost, I’d be pretty strongly in favor. As is…. Not so sure. The Tigers are a franchise that would probably like to be able to buy picks, if that were at all possible (like the used to do by paying above slot) and teams in that kind of a position are now the teams that are best off paying a premium in free agency for the guys that didn’t or couldn’t receive qualifying offers like Joe Nathan or Torii Hunter.
I expect we’re going to see more players accepting those offers next offseason than we have lately, but I also expect that we’re going to see this revisited extensively when it comes time to renegotiate the next CBA. The MLBPA is going to be very happy about just how much the system damages the value of their members in free agency, particularly guys who would otherwise have been earning a similar salary to the QO but would prefer more contract stability. If I might propose a compromise… How about allowing signing teams to make side deals with the team that made the qualifying offer in order to waive it? It’s not going to benefit the Mariners at all to have Kendrys Morales playing in Japan next year and it’s presumably not going to benefit the Mariners at all to have Kendrys Morales playing for the Mariners next year. The Pirates or the Brewers aren’t going to sacrifice picks, but maybe they’d be willing to send a fringy prospect over to the Mariners in order to sign the guy instead.
Tags: Detroit Tigers